Big Indian Telcos Accuse Amazon of Bypassing International SMS Fees

Retail giant Amazon has provoked a fight with India’s largest mobile networks by arguing enterprise customers should only be charged for the domestic leg of an SMS message they send if the international leg originates on a server in another country and was conveyed to India by means that do not involve conventional comms networks. The Economic Times reports that Amazon is pushing the Telecom Regulatory Authority of India (TRAI) to provide a definition of national and international messages in order to limit the charges that Indian telcos can apply to A2P SMS messages.

…Amazon argued that technological advancements have resulted in solutions which operate prior to the generation of the actual message that do not interact with any telecom network. “Given that termination charges for SMS are passed on to the (enterprise) customers, the lack of clarity on ‘international SMS’ and ‘domestic SMS’ allows TSPs (telecom service providers) to adopt their own interpretation and categorise a message generated by a computer resource/ server located outside India as ‘international SMS’, in spite of the origination and termination of the SMS being limited to the network of TSPs in India, to bring it under the scope of forbearance,” Amazon said in its comment.

As usual in such cases, Amazon’s motivation is linked to an enormous gulf between charges for international and domestic traffic. An international SMS terminating in India costs INR5 (USD0.06) whilst the equivalent charge for a domestic SMS is INR0.13 (USD0.0016). The cost for domestic SMS messages has recently risen but the disparity will tempt other businesses to emulate Amazon’s methods by ensuring A2P SMS messages composed by systems outside of India are only presented as if they originated within the country.

Jio, Vodafone Idea and Airtel all disagree with Amazon’s conception of the difference between domestic and international SMS traffic. Vodafone Idea compared the approach to bypass fraud for voice.

“We reiterate that such masquerading of international SMS as domestic SMS (through A2P or P2P route) is akin to grey voice call frauds where international calls were terminated on end Indian consumers as domestic calls, due to commercial gains and was quite prevalent in past,” the telco said. The technological advancement cited by the global giants in their responses would make any definition of international SMS redundant and generic in the coming years, Vodafone Idea said.

It took some countries a couple of decades to work out if bypassing termination fees for international voice was a desirable aspect of a free market or an attempt to defraud telcos by violating their contracts. It was only in March of this year that the UK’s Supreme Court ruled that bypass operators were not allowed to use simboxes. Now the same issues are playing out again in a new context. Telcos are right to be worried. A business like Amazon can use their global data center resources to ferry messaging data from one place to another in order to select the cheapest location to convert it into a more conventional stream of messaging traffic handled by carriers. And if they save money by doing that for the relatively simple data involved in sending SMS messages, it may not be long before they attempt the same for the two-way data streams required for voice calls.

Telcos are going to fight their corner for fear that businesses like Amazon will otherwise consume most of the declining international market for voice and SMS messages. Amazon has already shown an aptitude for turning the mechanics of their business into revenue streams. The logistical operations Amazon created for themselves are also hired out to other retail vendors; if they create a parallel communications infrastructure then that could also be opened up for use by others, accelerating the decline of traditional comms providers.

The forces of law and politics are not certain to ally themselves with telcos, although favoritism will likely be shown to companies that pay the most taxes and employ the most people in each country. The UK’s Supreme Court ultimately had to determine the legality of using simboxes because politicians and regulators failed to draw consistent conclusions about when they should intervene in the market to ensure all businesses have fair access and when it is desirable to permit telcos to impose some price differentials or restrictions on who may connect to their networks.

The decision reached by TRAI in this instance could set an important precedent for businesses and regulators worldwide. The population of India is 1.4 billion; Airtel and Jio are both ranked amongst the top 10 mobile networks in the world by subscriber numbers, and Vodafone Idea has only recently slipped to 11th. If big countries and big transnational trading blocks reject Amazon’s opinion on how to charge for traffic then it will increase the retail giant’s costs. But if they do not, the big US tech businesses may rapidly consume much of the dwindling market for international comms traffic.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.